Corporate foreign policy: Companies are becoming influential diplomats

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Corporate foreign policy: Companies are becoming influential diplomats

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Corporate foreign policy: Companies are becoming influential diplomats

Subheading text
As businesses grow bigger and richer, they now play a role in making decisions that shape diplomacy and international relations.
    • Author:
    • Author name
      Quantumrun Foresight
    • January 9, 2023

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    Some of the world's largest companies now have enough power to shape global politics. In this regard, Denmark's novel decision to appoint Casper Klynge as its “tech ambassador” in 2017 was not a publicity stunt but a well-thought-out strategy. Many countries followed suit and created similar positions to settle disagreements between tech conglomerates and governments, work together on shared interests, and form public-private partnerships. 

    Corporate foreign policy context

    According to a paper published in the European Group for Organizational Studies, as early as the 17th century, corporations have been trying to exert their influence over government policy. However, the 2000s have seen a marked increase in the magnitude and type of tactics used. These efforts aim to influence policy debates, public perceptions, and public engagement via data collection. Other popular strategies include social media campaigns, strategic partnerships with non-profit organizations, publications in major news organizations, and overt lobbying for desired laws or regulations. Companies are also raising campaign funding through political action committees (PACs) and collaborating with think tanks to shape policy agendas, influencing legislation debates in the court of public opinion.

    An example of a Big Tech executive turned statesman is Microsoft President Brad Smith, who regularly meets with heads of state and foreign ministers about Russia’s hacking efforts. He developed an international treaty called the Digital Geneva Convention to protect citizens against state-sponsored cyberattacks. In the policy paper, he urged governments to create an agreement that they would not attack essential services, such as hospitals or electric companies. Another suggested prohibition is attacking systems that, when destroyed, could damage the global economy, like the integrity of financial transactions and cloud-based services. This tactic is just an example of how tech firms are increasingly using their influence to persuade governments to create laws that would be generally beneficial for these firms.

    Disruptive impact

    In 2022, news website The Guardian released an exposé on how US-based power companies have secretly lobbied against clean energy. In 2019, Democratic state senator José Javier Rodríguez proposed a law wherein landlords would be able to sell their tenants cheap solar power, cutting into energy titan Florida Power & Light's (FPL) profits. FPL then engaged the services of Matrix LLC, a political consulting firm that has wielded behind-the-scene power in at least eight states. The next election cycle resulted in Rodríguez's ousting from office. To ensure this outcome, Matrix employees funneled money into political ads for a candidate with the same last name as Rodríguez. This strategy worked by splitting the vote, resulting in the desired candidate's victory. However, it was later revealed that this candidate had been bribed to enter the race.

    In much of the southeast US, large electric utilities operate as monopolies with captive consumers. They are supposed to be tightly regulated, yet their earnings and unchecked political spending make them some of the most powerful entities in a state. According to the Center for Biological Diversity, US utility firms are allowed monopoly power because they are supposed to advance the general public interest. Instead, they are using their advantage to hold onto power and corrupt democracy. There have been two criminal investigations into the campaign against Rodríguez. These investigations have led to charges against five people, though Matrix or FPL has not been accused of any crimes. Critics are now wondering what the longer-term ramifications might be if businesses actively shape international politics.

    Implications of corporate foreign policy

    Wider implications of corporate foreign policy may include: 

    • Tech firms routinely sending their representatives to sit in major conventions, such as United Nations or G-12 conferences to contribute to key discussions.
    • Presidents and heads of state increasingly inviting domestic and international CEOs for formal meetings and state visits, like they would with a country’s ambassador.
    • More countries creating tech ambassadors to represent their respective interests and concerns in Silicon Valley and other global tech hubs.
    • Companies heavily spending on lobbies and political collaborations against bills that would limit their scope and power. An example of this would be Big Tech vs antitrust laws.
    • Increasing incidents of corruption and political manipulation, particularly in the energy and financial services industries.

    Questions to comment on

    • What can governments do to balance the power of companies in global policymaking?
    • What are the other potential dangers of companies becoming politically influential?

    Insight references

    The following popular and institutional links were referenced for this insight: